Fed sticks to US stimulus reduction

19:34, Jan 29 2014
US Federal Reserve Chairman Ben Bernanke
LAST CALL: US Federal Reserve Chairman Ben Bernanke.

The Federal Reserve says it will cut its monthly bond purchases by an additional US$10 billion (NZ$12.1b) to US$65b because of a strengthening US economy.

It's doing so even though the prospect of reduced Fed stimulus and higher US interest rates has rattled global markets.

The Fed also reaffirmed its plan to keep short-term rates at record lows in a statement issued after Ben Bernanke's final policy meeting. Bernanke will step down Friday after eight years as chairman.

Many investors fear that reduced Fed bond buying will boost US rates and cause investors to move money out of emerging markets and into the United States for higher returns. Currency values in emerging nations have fallen. India, Turkey and South Africa have raised rates to try to protect their currencies.

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AP